Stocks staged a remarkable comeback on Monday, erasing earlier losses fueled by Moody’s downgrade of the U.S. credit rating. The initial dip, around 1% for the S&P 500, was quickly absorbed by buyers, suggesting a more resilient market than initially anticipated. By mid-afternoon, the index was only slightly down, around 0.1%, and the 10-year Treasury note yield, which had spiked to 4.56%, retreated to approximately 4.48%.
Capital One experienced a significant boost, with shares rising by 1% to around $199. This positive movement followed the completion of its $35 billion acquisition of Discover Financial, a deal fifteen months in the making. The successful merger, coupled with the settlement of a major lawsuit involving its savings accounts (a $425 million restitution agreement), appears to have overshadowed any lingering negative sentiment. Jim Cramer, a prominent financial commentator, even declared Capital One his “favorite stock,” highlighting the anticipated synergies of $2.7 billion annually by 2027.
The investment banking sector saw some initial selling pressure following comments from JPMorgan’s investor day, predicting a mid-teen percentage year-over-year decline in investment banking fees for the second quarter. However, these losses were quickly recouped. JPMorgan also projected mid-to-high single-digit percentage growth in trading revenue for the second quarter, driven by increased market volatility and a resurgence in IPO and M&A activity. This positive outlook, along with the overall market recovery, contributed to the overall positive sentiment.
Looking ahead, Home Depot is slated to release its earnings report on Tuesday, and Evercore ISI analysts have added the stock to their “tactical outperform list,” anticipating improved sales trends throughout the year. Other companies reporting include Viking Holdings and Amer Sports. No significant economic data releases are expected on Tuesday.
The CNBC Investing Club, led by Jim Cramer, continues to provide actionable insights and updates, including the daily ‘Homestretch’ afternoon report, designed to assist investors in navigating the final hour of trading. For subscribers, trade alerts precede any trades made by Jim Cramer in his charitable trust portfolio, with waiting periods in place to ensure transparency and compliance.
